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How effective will Indonesia’s palm oil permit freeze really be?

An oil palm plantation in Indonesia's Riau province. Photo by Rhett A. Butler/Mongabay

  • Last month, Indonesian president Joko Widodo took a major step toward preventing a repeat of 2015’s fire and haze crisis when he declared a moratorium on new oil palm and mining permits.
  • It appears, though, that the licensing freeze will not be passed into law, prompting concerns over the penalties that can be applied to violators.
  • A recent Greenpeace study has found 1,404 oil palm concessions the NGO says need to be reviewed because they contravene the the 2011 forestry moratorium brought in under similar terms by Widodo’s predecessor.

Environmental groups have raised concerns that Indonesian president Joko “Jokowi” Widodo’s planned moratorium on new oil palm and mining concessions will have limited impact without hawkish enforcement by local governments and police.

Jokowi said last month during a visit to an island north of Jakarta that the government would prepare a policy document banning new permits in the sectors. “No one can request an oil palm concession any longer,” Jokowi said while launching a conservation initiative on April 14 in Pulau Karya, a small island in the Pulau Seribu district.

The details are not yet clear but Jokowi plans to slowly change Indonesia’s business-as-usual approach to two sectors that are vital to the economy, but lead the way in damaging the archipelago’s environment. Last year, more than half a million Indonesians were diagnosed with respiratory ailments as more than 2.6 million hectares of land were burned in the worst agricultural fires for almost two decades. Chief executives of major agribusinesses have piled in with their support for Jokowi’s plan — Cargill Indonesia CEO John Hartmann was one of several plantation executives to support the announcement in recent weeks. The Indonesian Palm Oil Association has offered a cooler response, emphasizing that the sector supports millions of jobs.

A worker on an oil palm plantation in Indonesia’s Riau province. Photo by Rhett A. Butler

Jokowi’s announcement has been praised in other quarters as a decisive move by a reform-minded president eager to improve Indonesia’s tragic record of land management. However, Jakarta-based lawyers and Indonesian environmental groups say the reality is more complex.

Legal standing

Jokowi is understood to be proposing to sign an Inpres banning the licensing of new concessions. An Inpres is a policy instruction from the president to the various ministries — it is not legally binding. Some NGOs have called for the president to go further. “What we need now is a government regulation,” said Teguh Surya at Greenpeace Indonesia. “An Inpres is not a regulation. It is just an internal instruction from the president to the ministers.”

Lawyers say Jokowi’s decision to issue a policy instruction rather than a binding regulation means future violators would be subject only to an administrative sanction, not a criminal penalty. Aside from a lone victory against oil palm grower PT Kallista Alam, Jakarta has yet to place meaningful sanctions on firms alleged to be culpable in allowing fires to start in their concessions — a local court dismissed a $550 million lawsuit against one company, PT Bumi Mekar Hijau, late last year. Jokowi nevertheless favors the Inpres as a tool to roll out policy. Analysts say this is because an Inpres is politically expedient and quicker to push through, though potentially less effective than a presidential regulation.

President Jokowi announces a moratorium on new oil palm and mining permits on International Day of Forests (Hari Hutan Internasional) last month. Photo courtesy of the government

Nirarta Samadhi, country director of the World Resources Institute, says rigorous enforcement of the moratorium is key, regardless of whether it is codified in law or communicated as government policy to frontline ministries. This will require strict monitoring from the president’s office — and a push by the State Palace to ensure better coordination among law enforcement, local governments and communities.

Myriad overlapping regulations mean changing the law is a time-consuming business in Indonesia. It also carries a certain degree of risk for the president — parliament must approve a law change, and Jokowi has so far shown himself to be uninclined to test his strength with Indonesia’s temperamental legislature.

The distinction between a presidential instruction and a regulation is significant for the planned moratorium.

A recent Greenpeace study has found 1,404 oil palm concessions the NGO says need to be reviewed because they contravene the 2011 forestry moratorium brought in under an Inpres by Jokowi’s predecessor, Susilo Bambang Yudhoyono, which banned new concessions in old-growth forests and carbon-rich peatlands. Greenpeace says the land grants overlap with more than 1.1 million hectares of forestry within the moratorium Yudhoyono established in 2011.

Further complicating the issue, the data also show these concessions overlap with more than 3.5 million hectares of peatland. Earlier this year, Jokowi established a new agency led by former Wetlands International chief Nazir Foead to restore 2 million hectares of peat by end-2019. The agency has also been charged with reviewing concessions that stray into peat in provinces in Kalimantan, Papua and Sumatra.

“Another main concern of ours is the transparency — a lot of details are not open to the public,” said Greenpeace’s Teguh. “The public needs to know every single update, every single change [to a permit to operate a oil palm concession].”

“We need to create a system where people have access to the progress,” said WRI’s Samadhi. “Then the public would be able to have their say when it comes to the implementation.”

Enough is enough

Jokowi’s position on the moratorium is that the size of Indonesia’s existing oil palm land bank is sufficient to meet demand and that no new ground should be given to plant the cash crop. Oil palm plantations currently cover around 11 million hectares across the archipelago, with around 40% cultivated by smallholders and the rest on large estates.

Oil palm fruit in Indonesia’s Sumatra. Photo by Rhett A. Butler/Mongabay

The president believes productivity gains on existing plantation land can meet future demand growth for palm oil. Yields, particularly on plantations run by smallholders, are desperately low in Indonesia. Across Indonesia’s total land bank, productivity is approximately half that of neighboring Malaysia, the world’s second-largest producer.

“Who needs to increase productivity?” asked Samadhi. “For sure it is the smallholders.”

The environment and the agriculture ministries’ strategy is that low-tech plantation companies and 2 million smallholders must adopt better growing practices over the medium term. Enabling small farmers to access high-quality seeds will be the most-important factor. Smallholders, who are frequently poor and indebted, also require access to pricey fertilizer to improve yields.

This will require new state funding to enable smallholders to manage the costs of replanting using more-productive seedlings. High-quality seeds are currently prohibitively expensive for many and smallholders face a four-year wait for the palm fruit to start growing, during which they will receive no revenue. Around half of the Indonesian palm oil sector is unable to access capital needed to acquire productive seeds and fertilizer.